Investors will likely enjoy 2022 on the back of the most optimistic outlook for rental incomes since 2008.
Rents nationally averaged an increase of almost 10% last year despite a Covid roller-coaster ride on which many city apartments sat empty after students and non-citizens headed home because of the pandemic.
While gazing into the crystal ball is risky at the best of times, the onslaught of Omicron and any variant that might follow makes predictions especially tricky.
But as an experienced agency in your area, we can see how the data reflects the supply and demand for rental properties in our area. We remain positive about the prospects for the next 12 months for both owners and investors.
Property values rose significantly last year – nationally, they were up 22%. That’s always great news for investors as capital gain should always be a vital component of your strategy.
Industry researcher CoreLogic suggests value growth is not finished, although it will be more modest this year.
Of course, with property values rising at historic levels in 2021, rental yields are smaller. In fact, CoreLogic says they’re at their lowest since records began.
Investors should take a long-term view because rental payments will continue to climb on the momentum of last year’s 9.4% average increase, and we believe they’ll out-pace tapering property values.
Great long-term investment opportunities will emerge in 2022 as strong rental demand fuels attractive returns. While we won’t see the market exuberance of last year, we believe 2022 will be a fascinating time for investors. We hope you find these extra observations helpful, too.
Supply is key
Local factors will influence values more than national economic issues. The size and quality of local housing stock for sale will be critical. Remember, Australia is not one massive real estate market but thousands of micro-markets, each with characteristics that influence time-on-market and prices. Try to avoid selling if a large property development is coming online in the neighbourhood as they can absorb a lot of demand from both buyers and tenants.
Buyer caution
Buyers will pull back from owners they regard as “trying to cash in”. If you’re thinking of selling any part of your portfolio, price it realistically. Properties go stale if they hang around on the market because they have been overpriced.
Rate rises
Money will start becoming more expensive. However, increases in the interest rate will be slow and unlikely to impact the market dramatically as they are currently coming directly from the banks themselves rather than mandated by the Reserve. Many buyers will have already factored in this risk.
Virus unknowns
Omicron and any variants that might follow remain the great unknown. Governments are making it clear we should live with the virus, and the economic stimuli provided previously is no longer available. Ultimately, how this virus affects the property market in 2022 is anybody’s guess.